IFRS S1/S2 Sustainability and Climate Disclosure Introduction Guidance｜Startrust

From sustainability issue inventory to financial impact and decision-making, establish disclosure capabilities that can be linked to financial reporting

The changes brought about by IFRS S1 and IFRS S2 are not just adding a sustainability report, but requiring companies to focus on the information needs of investors, lenders and other creditors to explain how sustainability and climate-related risk opportunities affect the company’s short, medium and long-term prospects.

Enterprises need to link governance, strategy, risk management, indicators and objectives with cash flow, financing capabilities, capital costs, assets, liabilities and operating plans, and provide information that is comparable, traceable and can support confidence within the reporting period consistent with financial statements.

Startrust helps companies start from the integration gap analysis and establish sustainable risk opportunities, climate scenarios, financial impacts, greenhouse gas data, industry indicators, disclosure documents and internal control processes, so that sustainability, risk, finance and operations departments can work together with the same set of data.

Clarify the relationship between IFRS S1, IFRS S2, SASB, TCFD, GRI and Taiwan regulations
Establish processes to identify, assess and monitor sustainability and climate risk opportunities
Analyze current and expected financial impacts, link strategy, budget and financial planning
Integrate Scope 1, Scope 2, Scope 3 and industry indicator data
Establish disclosure responsibilities, data audits, version records and assurance preparation mechanisms

Reservation consultation

Why do companies need to prepare IFRS S1/S2?

Taiwanese companies have entered a phased integration period

In accordance with the Financial Supervisory Commission’s blueprint for integration, Taiwan’s listed OTC companies will apply the IFRS sustainable disclosure standards in stages according to scale starting from the 2026 fiscal year. Enterprises should confirm the applicable year in accordance with the latest laws, company types and capital amounts, and work backwards on the risk inventory, data collection, internal control, trial preparation and confirmation preparation timetable.

Even if it has not yet entered the first batch of applicable scope, it is not advisable to wait until the reporting year to start. Many disclosures require comparative information, base years, interdepartmental processes and board oversight records that must be run in advance to create credible evidence.

Sustainable information needs to be linked to corporate value and financial reporting

Traditional sustainability reports often focus on policies, activities and performance; IFRS S1/S2 further requires companies to explain which risk opportunities can reasonably be expected to affect the company’s prospects, and how these impacts enter strategy, decision-making and financial planning.

Investors need comparable and verifiable information

Investors are not only concerned about whether companies set carbon reduction targets, they are also concerned about how much capital expenditure the target requires, whether it will affect products and assets, whether there are resources for the transformation plan, how management will supervise it, and whether the relevant data is reliable.

Confirmation and internal control cannot be done at the last stage

If the disclosed figures do not have field definitions, responsible persons, supporting evidence, audits and change records, even if the content is complete, it will be difficult to support internal audits or external assurance. Companies need to incorporate sustainable information into the formal reporting process instead of compiling it temporarily before the annual report deadline.

What are IFRS S1 and IFRS S2?

IFRS S1 requires companies to disclose sustainability-related risks and opportunities that can reasonably be expected to affect their cash flows, access to financing or cost of capital. The standards establish general requirements for complete disclosure, including material information, reported individuals, related information, comparative information, estimates, uncertainties, statements and reporting time, etc.

IFRS S1 is not a “list of all ESG indicators”. Enterprises need to determine which sustainability risk opportunities are significant based on their own business models, industries, value chains and corporate prospects, and use appropriate industry and theme guidance.

IFRS S2 further standardizes the disclosure of climate-related physical risks, transition risks and opportunities on top of the general requirements of IFRS S1. Content covers governance, strategy, risk management, climate resilience, scenario analysis, greenhouse gas emissions, industry indicators and climate targets.

IFRS S2 integrates the TCFD recommendations and incorporates industry-specific disclosure requirements derived from SASB standards. Companies should use both IFRS S1 and IFRS S2 rather than selecting climate indicators and disclosing them separately.

The global effective date of IFRS standards is not equal to the local mandatory application date

IFRS S1 and S2 will be effective from January 1, 2024, but each jurisdiction will decide on its own the method and timing of mandatory adoption. Taiwanese enterprises should base their declaration on the official decrees, approved versions and applicable guidelines of the competent authorities.

Which Taiwanese companies need to start preparing?

According to the integration plan announced by the Financial Supervisory Commission, listed companies will apply in stages. In addition to confirming its own capital amount and applicable year, enterprises should also consider the following scenarios:

The consolidated reporting scope of parent companies, subsidiaries or groups needs to be coordinated
Overseas listing, bond issuance, loan or investors have ISSB information needs
Client requests for climate risk, Scope 3 or transformation plans
Existing TCFD reports need to be linked to IFRS S2
Sustainable reports, annual reports and financial statements use different boundaries or periods
Greenhouse gas inventory does not yet cover consolidated financial reporting subsidiaries
Lack of formal internal controls, information systems and auditing processes for sustainable data

When judging applicability, it is necessary to confirm the reporting entity, reporting period, disclosure location, comparative information, assurance requirements and reporting deadline. The readiness level cannot be judged solely by “whether the company has a sustainability report”.

Four core contents of IFRS sustainable disclosure

Governance

Describe how the board of directors, functional committees and management oversee, manage and execute on sustainability-related risk opportunities, including responsibilities, capabilities, access to information, frequency of decisions, monitoring of objectives and compensation links. The disclosure content needs to correspond to the actual governance mechanism and meeting minutes.

Strategy

Describe how risk opportunities impact business models, value chains, strategies and decisions, and disclose current and expected financial impacts. Climate issues also need to explain transformation plans, major assumptions and strategic resilience.

Risk Management

Describe how an organization identifies, assesses, prioritizes and monitors sustainability and climate risk opportunities and how these processes integrate with overall enterprise risk management. You can’t just list the risk names, but also describe the methods, parameters, scope and priority.

Indicators and Targets

Reveal the metrics used to measure and manage significant risk opportunities, corporate-set or regulatory-required goals, and progress toward goals. Indicators should have clear definitions, boundaries, periods, methods, benchmarks and responsibilities.

How to identify major sustainability risks and opportunities?

From the perspective of corporate prospects and users of general-purpose financial reports

The term “significant information” in IFRS S1 refers to the omission, misstatement or ambiguity of information that can reasonably be expected to affect the decision-making of major users of general-purpose financial reports. This is different from GRI’s focus on the significant impact of organizations on the economy, environment and people.

Take stock of business models and value chains

Risk opportunities may exist in business operations, suppliers, customers, product use, logistics, financial investment and financing, or natural resource dependence. Enterprises need to establish an appropriate value chain scope and cannot just take stock of their own operating locations.

Use industry-specific information

Companies need to consider industry-related disclosure topics and indicators. The SASB standards can help identify sustainability issues in specific industries that may affect corporate value, but companies still need to judge the significance based on their own circumstances.

Link short, medium and long term time frames

Different risks may occur at different times. Businesses should define the short, medium and long term and align them as closely as possible with strategic planning, capital budgets, asset lives and financial plans.

Assess current and expected financial impact

The financial impact may be reflected in revenues, costs, asset impairments, capital expenditures, financing, insurance, liabilities or cost of funds. Enterprises need to establish reasonable methods and assumptions, and explain limitations and improvement plans when they cannot be quantified.

What climate information needs to be disclosed in IFRS S2?

Climate Physical Risks

These include acute risks such as typhoons, floods, droughts, and high temperatures, as well as chronic risks such as sea levels, long-term warming, changes in water resources or climate patterns. The assessment needs to take into account assets, locations, supply chains, timescales and financial exposures.

Climate transition risks and opportunities

Covers changes in policies and regulations, carbon prices, technology, markets, customer preferences and reputation, as well as opportunities such as low-carbon products, resource efficiency, renewable energy and new markets.

Climate Resilience and Scenario Analysis

Companies need to use methods commensurate with their own circumstances to conduct scenario analysis and assess the adaptability of strategies and business models in the face of different climate futures. The point is not to create complex models, but to make the analysis truly support strategy and decision-making.

Greenhouse gas emissions

IFRS S2 requires disclosure of Scope 1, Scope 2 and Scope 3 emissions, and handles organizational boundaries, measurement methods, emission coefficients and necessary classifications in accordance with the standards. The carbon inventory process needs to be connected with the scope of consolidated financial reporting and disclosed internal controls.

Transformation Plan, Capital Allocation and Targets

Companies need to explain how they will respond to climate risk opportunities, what resources they plan to invest, key assumptions and progress towards targets. If carbon rights, internal carbon prices or other market tools are used, their roles and methods should also be explained in accordance with the Code.

What will be affected by the 2025 IFRS S2 amendments?

The ISSB will issue amendments to greenhouse gas disclosures in December 2025, which will apply to reporting periods starting after January 1, 2027, and early application is allowed. Highlights include:

Allow Scope 3 Category 15 to be limited to investment and financing emissions as defined in IFRS S2 in certain circumstances
Allow investment and financing emissions to be split using alternative classification systems other than GICS
Clarify how GHG Protocol method exemptions apply when only some reporting entities are subject to jurisdictional requirements
Added exemption from GWP requirements using jurisdictions

Enterprises need to confirm the Taiwan-approved version and applicable methods, and manage current methods, advance application selection, compare information and version changes to avoid mixing different requirements in the same reporting period.

What is the difference between IFRS S1/S2 and GRI sustainability report?

Comparative Orientation	IFRS S1/S2	GRI Sustainability Report
Main users	Investors, lenders and other creditors	Broad range of stakeholders
Materiality focus	Sustainability risk opportunities that affect corporate prospects	The significant impact of organizations on the economy, environment and people
Report Links	General Purpose Financial Reports and Financial Statements	Sustainability Reporting and Stakeholder Communication
Industry Information	IFRS S2 Industry Guidelines and SASB Standards	GRI Industry Standards
Common information	Governance, carbon emissions, people, supply chain, goals and performance	Governance, carbon emissions, people, supply chain, goals and performance

The two sets of standards can share underlying data, responsibilities, and review processes, but their materiality judgments and narrative purposes are different. Enterprises should not regard the GRI material theme matrix directly as a list of IFRS material risk opportunities, nor should they establish two completely separate data systems.

What information does the company need to prepare?

Organizational structure, consolidated coverage and value chain
Enterprise risk management policies, risk lists and assessment methods
Board, committee and management governance records
Strategic plans, budgets, capital expenditures and financial forecasts
Revenue, costs, assets, liabilities, financing and insurance information
Scope 1, Scope 2 and Scope 3 emissions and supporting evidence
Climate scenarios, asset locations and supply chain risk data
SASB or other industry indicators
Sustainability goals, climate goals, transformation plans and progress
Existing annual reports, sustainability reports, TCFD and assurance information

Common IFRS sustainability disclosure issues of enterprises

Sustainability and finance departments work separately

Sustainability units have control over metrics and reporting, and finance units have control over budgets and financial numbers. Without common definitions and timelines, it is difficult to illustrate financial impacts or align with financial reporting.

Only move the TCFD content into the annual report

The existing TCFD is an important foundation, but IFRS S2 has more complete specifications for major information, reporting entities, financial impacts, industry indicators and general requirements, and cannot just be retyped.

Risks are only qualitatively described

Listing “carbon fee increases” or “extreme weather” is still not enough to support decision-making. Companies should gradually establish exposure, timing, likelihood, impact path and financial linkages.

Scope 3 data boundary is inconsistent with financial scope

Carbon inventories may be conducted under operational control laws, but financial reporting is within the scope of consolidated statements. Enterprises need to establish differences explanations, measurement methods and cross-subsidiary data processes.

Information is reviewed centrally before filing

Without daily control, mid-term review and management supervision, it is easy to find gaps at the end of the year. Sustainability data should be included in the annual accounting and reporting schedule.

How does Startrust assist enterprises in importing?

1. Applicability and integration gap analysis

Confirm applicable years, reporting entities, disclosure locations, assurance requirements and existing reports, and establish a gap matrix between standard requirements, regulations and the current status of the company.

2. Promote organization and governance mechanisms

Establish the roles, decision-making and reward mechanisms of the board of directors, management, sustainability, finance, risk, operations, audit and information units.

3. Identification of sustainable risk opportunities

Identify and evaluate sustainable risk opportunities that may affect the company’s prospects based on business models, value chains, industry guidelines and corporate risk processes.

4. Climate risk and scenario analysis

Inventory physical and transformation risks, establish locations, supply chains, time horizons and scenario assumptions, and assess strategic resilience and management priorities.

5. Financial impact and strategic link

Establish the impact path from risk opportunities to revenue, costs, assets, liabilities, capital expenditures and financing to assist finance and operations departments in forming reasonable estimates.

6. Indicators, Goals and Data Processes

Take inventory of Scope 1 to 3, SASB industry indicators and corporate goals, and establish a data dictionary, responsibilities, evidence, review and change management.

7. Trial editing exposure and cross-file consistency check

Complete the trial compilation based on governance, strategy, risk management, indicators and goals, and check whether it is consistent with the financial report, annual report, sustainability report and official website information.

8. Internal control, audit and assurance preparation

Establish disclosure control, approval and record keeping, perform mock inspections and improvements, and assist in preparing information required for external assurance or reporting by competent authorities.

Coaching content and deliverables

Main counseling work

Analysis of the gap between IFRS S1/S2 and Taiwan standards
Confirmation of individual reporting, significance and disclosure boundaries
Identification of sustainability and climate risk opportunities
Analysis of climate scenarios and strategic resilience
Link to current and expected financial impact
Scope 1 to 3 and industry indicator inventory
Sustainable disclosure process and internal controls
Trial compilation, cross-document review and confirmation preparation

Expected deliverables

Applicability and integration gap analysis report
Project timeline, governance and responsibility matrix
List of sustainable risk opportunities and assessment results
Climate scenario, risk and resilience analysis
Financial impact paths and estimation methods
Dictionary of indicators, targets and data
IFRS S1/S2 disclosure matrix and trial draft
Internal controls, audits and substantiation lists
Cross-file consistency and improved reporting
Confirm and prepare information for formal declaration

The actual delivery content is confirmed based on the applicable year, enterprise size, group scope, data maturity and assurance arrangements; external assurance opinions are issued by assurance agencies that meet the requirements and maintain independence.

What changes can be brought about after importing?

From ESG performance narrative to sustainable risk and financial decision-making

Companies can explain how sustainability issues affect strategy, cash flow, assets, financing and costs, making it easier for management to allocate resources.

From temporary submission of information from various departments to formal reporting process

Metrics have definitions, responsibilities, substantiation, reviews and timelines that work with the financial close and annual reporting timelines.

From listing climate risks to assessing strategic resilience

Enterprises understand the feasibility of business models and transformation plans under different futures through situation, time and financial impact assessments.

IFRS, GRI, annual reports, TCFD, customer questionnaires and evaluations can share data management and then output according to different purposes.

From being prepared to be convinced at the end, to continuing to accumulate evidence

Control and evidence are integrated into the daily process to reduce the large number of supplementary documents and numerical corrections before declaration or confirmation.

Why choose Startrust?

IFRS S1/S2 requires a simultaneous understanding of sustainability, climate, carbon data, risk and finance. Startrust can help companies transform standard requirements into cross-departmental data and management processes, and connect carbon inventories, internal carbon pricing, TCFD/TNFD, sustainability reports and digital management tools.

When you need to centrally manage indicators, goals and improvement plans, you can use the Sustainability Performance Management Module; when you need multi-person collaboration, review and version management, you can connect to the Sustainability Report Co-editing Module.

FAQ

What is the difference between IFRS S1 and IFRS S2?

IFRS S1 specifies the general requirements for all significant sustainability-related financial information; IFRS S2 specifically specifies climate-related risk opportunities and should be used in conjunction with IFRS S1.

Which Taiwanese companies will be eligible starting from fiscal year 2026?

Taiwan is adopting a phased approach, and the scope of the first batch and subsequent schedule should be confirmed in accordance with the latest laws and regulations of the competent authority, company type and capital amount. Companies cannot rely solely on early briefings and should recheck when the project is launched.

Should IFRS disclosure be placed in the annual report or the sustainability report?

IFRS standards require information to be part of general-purpose financial reports, but the specific location of disclosure is determined by local regulations. Taiwanese enterprises should make arrangements in accordance with the formal reporting requirements of the competent authorities and ensure that they are contemporaneous with the financial statements.

Do IFRS S1/S2 and GRI need to be prepared at the same time?

The purpose and materiality of the two are different. Taiwan listed companies may face sustainability reporting and IFRS disclosure requirements at the same time. Data and controls can be shared, but corresponding materiality judgments and disclosures must be completed separately.

What should I do if the Scope 3 data is incomplete?

Enterprises should first confirm the major categories, data sources, estimation methods, limitations and improvement paths, and use reasonable and supportable information in accordance with applicable standards. Significant sources should not be omitted entirely just because the data are incomplete.

Is it necessary to use complex quantitative models for climate scenario analysis?

The approach needs to be commensurate with the business’s circumstances, capabilities and available resources. Companies can move from qualitative screening and exposure analysis to quantifying financial impacts in stages, but they need to explain the methods, assumptions and limitations.

Is confirmation from an accountant or third party required?

Depends on Taiwanese laws, applicable year and disclosure items. Enterprises should confirm the scope, criteria and timeline of assurance in advance; consultants will assist in establishing data and controls, and assurance opinions will be issued by independent agencies.

If you are planning to integrate, you can first prepare the latest annual report, sustainability report, consolidated financial reporting scope, corporate risk inventory, carbon inventory, climate report and current data process, and let a consultant assist in making preliminary gap judgments.

Book a consultation